Municipal bond analysts continue to reevaluate their market after the Alabama Legislature refused to pass a rescue bill to back Jefferson County’s general obligation debt. That debt is supposed to be backed by the irrevocable full faith and credit of the county, but without home rule, that pledge could be meaningless, the Bond Buyer reports. And according to county bankruptcy lawyer Kenneth Klee, half the counties in the country have the exact same power structure.
When revenues run short, the county must provide services, he said.
Klee suggested Jefferson County warrant holders consider pursuing payment from the Alabama Legislature, since it retains the ultimate authority over the county’s ability to pay the debt.
“If that’s not the case, then it means nothing to have a county issue a full-faith-and-credit obligation other than an empty hope and a prayer,” he said.
Analysts no longer see the county’s woes as only a complex debt instruments gone bad, as with the sewer debt crisis. With the legislature refusing to approve new taxes, there is a political unwillingness to make good on the government’s debts.
“National is disappointed by the failure of Jefferson County’s state legislative delegation to reach a consensus on a solution to the county’s budget shortfall and remains concerned that the gridlock in the Legislature will have negative repercussions for other municipalities throughout Alabama as well as for the state itself,” said chief risk officer Adam Bergonzi.